Expect the Nifty to touch 6100 levels in near term: Tushar Mahajan, Nomura

In an interview with ET Now, Tushar Mahajan, Head of Listed Futures & Options, India, Nomura, shares his views on the market. Excerpts:

ET Now: Do you think we have a solid trading bottom in place after today's gap-up start or in the near term it is too early to predict?

Tushar Mahajan: Today's move is definitely very encouraging, especially given the fact that we have broken past that 5900-5920 levels, where we were stuck for the last three weeks. Every time we tried to break past, the markets followed with a sell off back down. Therefore, the fact that this move up is sustaining above 5920 and after the gap up opening, unlike in the recent times, we are building on to that momentum to pick up. Hopefully, this is cause for a better move and we could see the market now move up to the 6100 levels.

ET Now: Sectorally what do you think is going to lead the market up to that 6100 mark, because the key sectors have been underperforming?

Tushar Mahajan: Since we have the first FOMC comments around the QE tapering on May 22nd, yields have been behaving in a manner which was not really anticipated by the markets per se. That is what you saw with the currency as well, which adds on to the inflationary pressures.

There had been a school of thought which advocated for rate increases. But given what happened yesterday at the FOMC and Mr. Bernanke toning down a lot of his expectations, we could see trade beginning to wind down a bit.

If a 6100 move up from here is building on to the momentum of today, you could see commodity as well as metal names getting the markets a bit higher to the 6100 odd levels.

ET Now: So in the book which you run have you cut your shorts, have you initiated longs?

Tushar Mahajan: The positioning is definitely more on the long side. I would advice you to be nimble at this point in time and if the first signs of pains begin to re-emerge, you will have to cut down those longs as well.

ET Now: But have you changed the directional move only after last night's Fed communications or before the Fed move?

Tushar Mahajan: The sentiment was beginning to turn bullish, but in terms of adding the move to 5900-5920, the market sustaining above that level has added conviction to our momentum trade.

ET Now: What is happening with Infosys because the way the stock has been running up is intriguing or is this just a build up only to short tomorrow?

Tushar Mahajan: Not necessarily. The development which is keeping the entire IT pack up today is the dilution on that US immigration bill, which was a big overhang on the sector as a whole. Tomorrow the options continue to trade rich and they are still pricing in a large move post results.

My own sense is, given it is going to be Mr. Narayana Murthy's first outing on an earnings day after having taken over, people are going to be looking at it from a guidance standpoint and if that gets something which suits investors' concerns, you could see the stock pick further steam from here on.

Â ET Now: For someone who wants to make a quick buck, because of the result volatility, how should one position himself in Infosys?

Tushar Mahajan: This trade has been on and people continue to position themselves in trying to buy at the money options on Infosys, even though they are expensive. You could look to buy the Infosys at this point in time and if you do get a move which is larger than the 10-12% premium, you will definitely end up standing to gain money.

There is, however, an alternate view emerging at this point in time, which seems to think that with guidance coming back to the company, you would probably bid goodbye to the big volatile moves on the earnings day and as a result you might want to take advantage and eat up the premium. However, I will probably wait for what happens tomorrow. At this point in time, I would like to play with the long option strategy.

ET Now: Do you think the tilt towards the pharma pack is going to continue for some more time?

Tushar Mahajan: Earlier the defensive trade was keeping both the consumer and pharma stocks up, but now incrementally, the rupee benefits to the sector are beginning to percolate down. Given the fact that the companies have not disappointed as much on the earnings, my own sense is that in the front line pharma names, like Dr Reddy's, Sun Pharma, and Lupin, out-performance may continue.

ET Now: Do you think much of the technical adjustment in HUL is behind us?

Tushar Mahajan: Yes, largely so. The huge spike that we had seen on the open interest over the last two months, ever since the open offer was announced, is beginning to come off. The stock, as a result of the technical adjustment, opened around the Rs 630 odd levels and is now stabilising around the Rs 600-590 levels, which coincidently happens to be the open offer price.